The rapid-fire ouster of the chief of the Vatican bank and the arrest of the Pope’s butler have plunged the Vatican into yet another crisis. Were the two events connected?

Ettore Gotti Tedeschi, president of the Vatican bank, formally known as the Institute for Works of Religion, was fired last Thursday for a variety of alleged sins, including “progressively erratic behaviour,” by the bank’s board of superintendence. Two days later, Paolo Gabriele, Pope Benedict’s butler since 2006, was arrested for the unauthorized possession of sensitive Vatican documents.

Leaks

The firing and the arrest have, at least on the surface, plunged the Vatican into one of its worst crises since Benedict became pontiff in 2005, only to find himself scrambling to clean up the church’s sexual-abuse mess.

But sources close to the Vatican say that while last week’s events were embarrassing to Benedict, they are evidence that he is working hard to clean up the Vatican bank and other nooks and crannies within the church’s Rome headquarters.

“Transparency is the issue,” said a Vatican source, who did not want to be named. “He wants the bank to be clean.”

The Vatican’s media office insists there is no link between the firing of Mr. Tedeschi, who is a former executive of Santander, Spain’s most successful bank, and Mr. Gabriele. But both men are accused of at least one similar offence – leaking documents.

Mr. Gabriele was formally charged with stealing confidential papal documents and passing them to the news media. Some of the documents obtained by the Italian press in the so-called “Vatileaks” scandal reportedly related to the Vatican bank’s halting efforts to comply with international standards to fight money laundering and terrorist financing.

Many of the documents found their way to Italian journalist Gianluigi Nuzzi whose book,
Your Holiness: The Secret Papers of Benedict XVI, was published shortly before the ouster of Mr. Tedeschi.

Among the nine allegations made in support of Mr. Tedeschi’s firing was his “failure to provide any formal explanation for the dissemination of documents last know to be in the President’s possession,” according to the two-page, no-confidence resolution written by Carl Anderson, a member of the bank’s board of superintendence, and obtained by The Globe and Mail.

The Vatican is investigating the leaks that created turmoil within the its ranks since last year. The Italian news media have suggested that the leaks are part of a power struggle designed to discredit Cardinal Tarcisio Bertone, Benedict’s right-hand man and head of the Vatican’s Secretariat of State.

The Vatican source suggested that Italian banks might be exploiting the leaks related to the Vatican bank itself. He noted that the banks would love to pick up some of the Vatican bank’s activities, should scandal force it to shrink. “Italian banks might be trying to discredit [the Vatican bank]in order to get its business,” he said.

The Vatican bank has its roots in the 1800s and came into its present form in 1942, under Pope Pius II. The secretive bank manages billions of euros in assets, including the Vatican’s vast portfolio of real estate and other investments. At times, it has been run by a professional chief executive plucked from the banking industry, and reports to a committee of cardinals who in turn report to the pope.

The bank is no stranger to scandal or political controversy. John Cornwell, one of the leading authorities on Benedict’s predecessor, John Paul II, wrote in his book
The Pontiff In Winter, that there are “indications” the Vatican bank funnelled $50-million (U.S.) to Lech Walesa’s Solidarity movement in Poland in the early 1980s. Mr. Cornwell cited rumours that the delivery man was Roberto Calvi, the Banco Ambrosiano chairman who was found hanged under London’s Blackfriars Bridge in 1982.

Mr. Calvi was called “God’s Banker” because of his close association with the Vatican bank and its boss, Archbishop Paul Marcinkus, who was known as the “Pope’s Gorilla” for his tough mannerisms. The Vatican was implicated in Ambrosiano’s fraudulent bankruptcy in 1982. Without admitting any wrongdoing, the Vatican paid $240-million to compensate Ambrosiano’s account holders.

Mr. Tedeschi was hired in 2009 to modernize the Vatican bank and make it transparent to the point it would comply with international banking standards. The bank’s goal was to make the “white list” of states that comply with the transparency requirements set out by the Organization for Economic Development and Co-operation. They are designed to fight tax evasion, money laundering and financing of terrorism.

The need to clean up the bank was highlighted in 2010, when Italian prosecutors, on suspicion of money-laundering violations, seized €23-million ($29-million U.S.) from a Rome bank account registered to the Vatican bank.

In an interview with Reuters, Mr. Anderson, the Vatican bank board member, said Mr. Tedeschi was ousted because he “was becoming an obstacle to greater transparency by his inability to work with senior management.”

On Monday, the Vatican denied Italian media reports that a cardinal was among suspects in the leaked documents’ scandals. The Vatican source, however, said that more arrests in the Vatileaks affair might be coming.

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